How is Commodity Margin Level Calculated?

We shall first explain the various commodity trading margin trading terms used in commodity trading platforms & then explain how commodity trading margin level is calculated using an example on MT4 software.

Commodities Margin, Margin Required, Equity, Used Commodity Trading Margin & Free margin

What's Margin Required? : It is the amount of money your commodity broker requires from you to open a position. It is expressed in percents.

What's Equity? : It is the total amount of capital you have in your account.

What's Used Commodities Trading Margin? : amount of money in your account which has already been used up when buying a commodity lot, this contract is one that is displayed in open trade positions. As a trader you can't use this amount of money after opening a trade order transaction because you have already used it and it is not available to you.

In other words, because your commodity broker has opened up a position for you using the capital you have borrowed, you must maintain this usable margin for your account as a security to allow you to continue using this commodity leverage he has given you.

What is Free Commodities Margin? : amount in your account which you can use to open new trades. This is amount of money in your trading account which has not yet been commodity trading leveraged because you have not yet opened a trade with this money - this is also very important for you as a trader because it enables you to continue holding your open trade transactions as explained and illustrated below.

Example of How is Commodity Margin Level Calculated on MT4?

The commodity trading margin example on MT4 commodity trading Software below, the set commodities leverage is 100:1, the commodity trading margin which is 1% is $2683.07, therefore the total amount controlled by the trader is: $268,307 - this is because with this leverage the trader has used little of his money & borrowed the rest, with this set at 100:1, the trader is using 1 % of their capital, this 1% equals to $2683.07, if 1% equals to $2683.07 then 100% is $268,307

How is Commodities Trading Margin Level Calculated?